In Hollywood, Everybody’s a Digital Revolutionary

Sunday

Jul 25, 2010 at 5:16 AM

Internet sites that promise to revolutionize movies or TV are popping up constantly, but do they represent a true boom backed by viable business models?

BROOKS BARNES

THE boom in digital entertainment — interrupted by the recession and the credit freeze — has returned to Hollywood. Almost daily, it seems, another start-up pops up to proclaim how it will revolutionize movies or television.

On May 10 came word of i-Trailers, a new company devoted to movie advertising on the Web and mobile devices. On May 11, Diva Mobile declared itself the entertainment industry’s “first cross-platform solution for video-on-demand” services. Arriving on May 13 was SulSet.com, a site promising to stream live, behind-the-scenes video from movie sets for a one-time $9.99 fee.

And the frenzy has continued. Just last Tuesday came Xumanii.com, which said it was “revolutionizing the way in which live entertainment and social networking come together.”

You get the idea.

But at some point, it’s worth asking: Is this a true boom, backed by serious investors with clear-headed business models? Or has the cost of entry become so low that this is just a false flush? To some, it seems like the latter.

“The problem is the same as in every gold rush: the gold is easier to see than to mine,” said Lindsay Conner, a lawyer at Manatt, Phelps & Phillips who specializes in entertainment finance. More serious financing is starting to trickle in, he said, “but we’re a ways away from truly cashing in on either the cost-saving or revenue-generating potential of the Internet for entertainment.”

Jordan Levin, chief executive of Generate, a digital production and distribution company, was more blunt. “Ad dollars are coming back, and digital deal-making may be quickening,” Mr. Levin said. “But it’s not enough to fuel a robust and dynamic market, and by that I mean a market that isn’t just a bunch of meaningless announcements.”

Start-ups, many of them self-financed, see it quite differently.

“We think we are reinventing television,” said David Levy, C.E.O. of Philo, a month-old social networking service that lets groups of people interact while watching television. “More people understand this time around that you have to have a serious idea,” he said. “Just because the barriers to entry are so low that anybody can start a company doesn’t mean that just anybody should.”

Technology is increasingly ripe for this kind of experimentation, says Larry Kramer, founder of MarketWatch.com and author of the forthcoming book “C-Scape: Navigating the Rapidly Changing Worlds of Media and Business.” He noted that Apple’s iPad and the rush by networks and movie studios to be a part of it — ABC was quick to offer 20 shows for iPad streaming — created a burst of activity by themselves. Internet-equipped television sets are also becoming more mainstream.

And digital sales of movie and TV shows continue to grow. The Digital Entertainment Group, a trade organization, said the category generated $1.1 billion in the first six months of the year, up 23 percent from the period last year. Most of the successful digital entertainment companies operate in this area, including Netflix, which recently said that use of its streaming service was running double last year’s rate.

The previous surge in digital entertainment occurred in 2007 and — with the exception of a few standouts like Hulu.com — fell flat with the broader economy in 2009. ManiaTV, a Web broadcaster that produced original shows, couldn’t refinance loans amid the financial crisis and closed its doors in March 2009. (It subsequently returned as a celebrity video site.) Ripe TV, heralded as the Maxim of Web video, died in June 2009.

Eight months to a year ago, a smattering of venture capitalists, studios and advertisers started dipping their toes back in, financing start-ups that began arriving on the market in the spring. In other instances, fledgling companies that did survive the downturn — like Break.com, dedicated to goofball videos and original Webisodes — have recently started to make waves again.

Some of the new bustle has produced real results. BermanBraun, a three-year-old Los Angeles production company, has found big success with

Wonderwall.com and Glo.com, which offer celebrity and lifestyle video and news in partnership with MSN.com. BermanBraun plans to introduce two other sites by year-end. And Mr. Levin’s company, Generate, is fruitfully tapping a flow of ad dollars into scripted Web programming.

Last Tuesday, a consortium of movie studios, television networks and consumer electronics manufacturers unveiled UltraViolet, an ambitious effort to make it easier for consumers to access and manage digital entertainment regardless of where it was bought.

BUT an awful lot of the companies angling for a piece of the action are long on goals and short on specifics. WowioTV.com, a digital channel devoted to comics, gossip and celebrities, “has big plans for the entertainment industry,” a news release says. Yowie.com (not to be confused with ZoweeTV.com) strives to become another spot for celebrities and their fans to gather for video chats.

Remember SulSet.com, the behind-the-scenes subscription movie site? Oops: it quickly ran into problems with the Screen Actors Guild, which objected that the cast was not getting a cut of the proceeds. To resolve that, it had to start giving free access to the site, upending its business plan.

Brent Weinstein, head of digital media for United Talent Agency, describes many of the ideas that are starting to surface as “junior varsity.”

“Where the market stands today there are more digital opportunities than ever,” he said. “Those that will be successful are the ones who understand the unique aspects of the platform and the audience.”

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